Legal & General hikes dividend after solid first half

Financial service company Legal & General reported a robust first-half performance on Tuesday, as it made progress toward its five-year ambitions set for 2020-2024.

The FTSE 100 company reported an operating profit of £941m for the period, slightly below the £958m recorded in the first six months of 2022.

Alongside that, its Solvency II coverage ratio - a crucial metric for insurance companies indicating their financial health - stood at a solid 230%, showcasing a surplus of £9.2bn.

That was an improvement from the first half of 2022, when the ratio was 212%.

On the dividend front, Legal & General declared an interim distribution of 5.71p, making for a 5% increase from last year’s first-half dividend of 5.44p.

That aligned with the company's longer-term strategy, with the board signalling its intention to maintain 5% annual growth in the dividend until the fiscal year 2024.

In terms of capital generation, £947m was recorded, providing ample dividend headroom.

The company highlighted progress concerning its five-year ambitions, emphasising that it was well on course, having achieved capital generation of £5.9bn, aiming to reach between £8bn and £9bn by 2024.

Dividends distributed until now amounted to £3.6bn, with a target of hitting between £5.6bn and £5.9bn by the end of that same year.

That resulted in a net surplus generation over dividends of £0.6bn.

Another significant aspect of the report was the rise in the stock of deferred profits, which had climbed to £13.8bn.

The board put the ascent down to new business ventures outstripping backbook release, with new business deferred profits reported at £0.6bn.

Legal & General's retirement division, LGRI, recorded premiums of £5bn, up from £4.4bn in the first half of 2022, which generated deferred profits of £0.4bn.

Moreover, in the second half, LGRI had penned an additional £1.8bn in the UK and $1.0bn in US pension risk transfer (PRT) deals.

“We remain on track to achieve our five-year ambitions and deliver attractive returns for our shareholders,” said group chief executive Sir Nigel Wilson.

“In the first half, we delivered £0.95bn of both IFRS operating profit and capital generation, together with a Solvency II ratio of 230% and a surplus of £9.2bn.

“The dividend is up by 5%.”

Wilson noted that LGRI and LGC performed strongly, LGIM results stabilised, and retail's performance - while impacted by competition in some areas - was bolstered by growing annuity sales and progress in US protection.

“We wrote £4.9bn of UK PRT, deploying just £106m of capital, underlining the benefits of our synergistic business model.”

Reporting by Josh White for Sharecast.com.